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Cost of Not Having Adequate Tax Governance? That's a $1 Billion question for a large multinational

Strong tax governance is essential, as evidenced by the recent tax settlement between the Australian Taxation Office (ATO) and a major mining business. These examples emphasise the necessity of strong tax governance frameworks for multinational corporations.

Is all the spend on Tax Governance systems, tools and design an overkill? A $1 Billion corporate tax settlement proves otherwise.

Companies run the risk of facing severe financial penalties and damage to their reputations without such arrangements. Therefore, multinational corporations must make sure they have sufficient systems and procedures in place to manage their tax affairs in a compliant manner.

Creating an effective tax governance strategy
Tax Governance

Compliance is only one aspect of the situation, though. The reputation and relationships of multinationals with stakeholders including governments, shareholders, and the general public may be impacted by their tax practices. A business is more likely to earn goodwill from all parties involved if it is perceived as paying its fair share of taxes.

Creating an effective tax governance strategy

Companies must ensure that their tax practices comply with laws in order to prevent such possible consequences. This includes making sure that records are kept accurately, tax forms are filed correctly, and taxes are paid on schedule. Businesses should also have sufficient internal procedures in place to identify and prevent tax avoidance.

Risk management, internal controls, transparency and communication, and accountability are the essential elements of successful tax governance. Risk management aids in identifying and controlling risks that can have an influence on the organization's tax obligation. Internal controls contribute to the effectiveness and efficiency of the organization's tax compliance procedures.

To ensure that all pertinent stakeholders are aware of the organization's tax plan, transparency and communication are crucial. Accountability matrices are also an effective tool in ensuring that a company has clearly defined stakeholders for ensuring the right amounts of taxes are paid in each business unit.

Tax Governance Technology

Since the early days of ledgers printed in cross-referenced binders up until the present day's sophisticated computer systems, technology has always played a part in tax governance. However, the recent surge in tax technology has had a significant impact on how taxes are handled. Tax technology has enabled tax authorities to handle more returns in less time by automating many of the procedures related to tax compliance. Furthermore, tax technology has improved the accuracy of tax data, making it simpler for authorities to locate and collect outstanding taxes.

Furthermore, tax technology has significantly improved tax governance. Tax technology will undoubtedly be crucial in assisting multinationals in achieving their rising tax reporting and compliance duties, despite the implementation still lagging behind in many listed organisations.

How to stay on top of changes in tax policy and technology

It can be challenging to stay current with the latest innovations in tax technology because it is always evolving. However, there are a few essential strategies for staying one step ahead. First, it's crucial to keep up with changing tax rules and regulations.

A great way to remain current on the most recent developments is to subscribe to numerous tax alerts. Finally, it's beneficial to utilise tax advisors to recommend suitable corporate tax software that is consistently updated with the most recent tax information and can assist in setting the proper frameworks to satisfy requirements from various tax countries. You may make sure that you're always on top of your tax obligations by heeding the advice in this article.

To speak with a tax governance professional with in-depth knowledge of your industry, please contact us.

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